Google finalizes $2.4 billion agreement with Windsurf to acquire CEO Varun Mohan and secure AI licensing rights after failed negotiations with OpenAI.

Alphabet Inc., Google’s parent company, has completed a $2.4 billion agreement to hire leading executives and obtain licensing rights from the artificial intelligence startup Windsurf. The agreement follows stalled discussions between Windsurf and Google’s rival OpenAI, as reported by Bloomberg, referencing sources familiar with the situation.

Google is hiring Windsurf CEO Varun Mohan, co-founder Douglas Chen, and several employees to join its DeepMind artificial intelligence team. Windsurf had been on the verge of completing a $3 billion deal with OpenAI, but the agreement fell through, in part due to strained relations with Microsoft Corp., a significant investor in OpenAI, the report noted.

Windsurf denied Microsoft permission to use its intellectual property, and OpenAI couldn’t obtain the tech giant’s consent regarding this matter. This is one of the aspects in the current discussions between Microsoft and OpenAI concerning the company’s attempts to transform into a commercial organization. Microsoft’s current pact with OpenAI indicates that the software giant is entitled to utilize the startup’s technology.

At the same time, OpenAI thought it had finalized a deal with Windsurf and was close to revealing the acquisition in early May. A letter of intent was executed, and Windsurf investors received details on waterfall agreements, outlining the anticipated earnings for each party, sources familiar with the development informed.

On Friday, an OpenAI representative announced that the exclusivity phase of its acquisition proposal has concluded, permitting Windsurf to consider additional offers. Google’s recent agreement arises from a pattern where leading tech companies are securing talent and technology from upcoming AI startups via arrangements that do not constitute complete acquisitions. Critics claim that these agreements are meant to circumvent antitrust laws.

In 2024, Microsoft hired the founders and much of the team from Inflection AI, along with obtaining a license for the company’s artificial intelligence software. Likewise, Amazon.com Inc. brought on board key executives and staff from the startup Adept AI Labs Inc., whereas Google secured the co-founders of Character.AI via a licensing deal. Regardless of the organization of these transactions, government regulatory bodies have begun probing some of these arrangements.

Windsurf, officially referred to as Exafunction Inc., is part of a cluster of startups creating AI-driven coding helpers — tools that can execute functions such as producing code from natural language inputs. Established in 2021, Windsurf has obtained more than $200 million in venture funding, the report indicated.